Even as issues relating to the state-run National Health Insurance Scheme dominate public attention, private health insurance cover is growing, albeit within a narrow market driven primarily by corporate clients on behalf of their employees. At a recent Insurance Seminar, organized by the Canada Ghana Chamber of Commerce, DAVID KOKU LEONARDS, the Business Solutions Manager at Metropolitan Health Insurance Ghana provided an insightful presentation on the structure of the private health insurance industry and the market in serves. TOMA IMIRHE examines his findings and perspectives and what they portend for this potentially massive specialized industry.
Private health insurance has been on offer much longer than the National Health Insurance Scheme has existed, having been initially introduced in the early 1990s by Nationwide Health Insurance, a sibling of Vanguard Assurance. But few people knew about its availability then and not many more know about the several options on offer now. Ask the average Ghanaian what he or she knows about health insurance in Ghana and the most likely reply would centre entirely around the NHIS itself.
But for corporate Ghana and up-market individuals, the situation is somewhat different. Recognizing the shortcomings of the NHIS with regards to both coverage and access to medication and healthcare, corporations and relatively affluent individuals, particularly expatriates working in Ghana, are increasingly turning to private health insurance schemes to guarantee their good health.
Currently, there are 15 providers of such private schemes and the competition is fierce being that the number of clients is limited and the products are largely generic meaning that competition is primarily along the lines of pricing and customer service quality.
David Koku Leonards, Business Solutions Manager at Metropolitan Health Insurance Ghana is one of the most knowledgeable and experienced private health insurance specialists in Ghana, having worked as a business development executive in the pharmaceutical sector before taking his current appointment, and his skills and expertise have been key in making Metropolitan one of the most capable and renown private health insurers in the country.
When the state-run health insurance scheme was first introduced in the middle of the previous decade, the primary concern was peoples inability to meet arising medical bills when delivered on a “cash and carry” basis. Even now, although a social insurance scheme that effectively lets the rich pay part of the medical bills of the poor, pricing in the form of premiums is still a significant issue with a previous administration making a sharp reduction in premiums one of its policy goals.
However, while improvements in living standards are making this less of a critical factor in the evolution of private health insurance, lifestyle is making it medicare as a whole more important, especially for the relatively well off.
“There is a growing awareness from weight management experts and dieticians especially in the corporate space’ affirms David Leonards. ”The growth of radio in spreading such awareness has been a major driver of this trend At the same time availability and consumption of fast foods have been on the rise especially in urban centres because the population is largely becoming urbanized.”
Indeed the obesity rate had climbed to 10.9 percent by 2015 even as life expectedly has risen from 58 years to 66 years.
But it is the NHIS rather than private health insurance schemes that have got all the media enlightenment coverage. “Education is high for national health insurance and unfortunately it is promoted as free cover, hence people do not assume the responsibility to own health insurance,” says Leonards.
While in truth the NHIS is by no means free it is certainly much cheaper than private health insurance. On the other hand, though private health insurance provides drastically better service that the state-run scheme which suffers financing strains that often reflect in the non-availability of service providers. This makes it ideal for those that can afford it, which is why it is the corporate sector and relatively affluent households and individuals that make up its market.
Leonards estimates the market at four million lives with a potential market value of GHc 3 billion. The key though is to unlock this market and success at this has been severely limited for several reasons.
“The industry focuses on the corporate segment of the private health insurance market” explains Leonards. “Scheme managers are experienced in business-to-business policy sales but have limited products and capacity or experience in selling to the retail market.”
Indeed all 15 service providers are concentrated in the corporate sector who buy policies for their employees but this translates into a meagre market penetration rate of just 0.66 per cent of Ghana’ 30 million population.
There are a few dominant players in the industry such as Metropolitan Health Insurance where Leonard himself works – but competition is fierce because of high supplier and buyer power the threat of substitutes and low product differentiation.
Suppliers derive their market strength from the limited number of drug suppliers, diagnostic centres and medical staff, while buyers get their strength from the fact that only large corporates buy private health insurance which means small effective demand. Also, industry player is not just competing with their private health counterparts who offer much the same products; they are also competing against the much cheaper (although inferior service quality) NHIS, which is also much more widely known.
Leonard’s SWOT analysis suggests that although the industry has several weaknesses and faces significant threats, it has strengths and opportunities to become a vibrant and growing industry.
Its strengths derive from the fact that the private cover offers far better value than the NHIS and the focus on employees of formal institutions minimizes the risk of non-payment of premiums. Besides this increasing collaboration and use of technology is reducing provider costs and fraud and management quality is improving as a result of deepening technical experience.
Conversely, there is over-concentration on a small segment of the market – the corporate sector – product differentiation is weak, the capacity to identify and blacklist fraudulent service providers is low because of the reluctance to share information and perhaps most importantly the industry has failed to develop unconventional ways of acquiring clients in the vast, untapped informal sector.
But this untapped informal market represents a huge opportunity and there is still lots of room for new business in the formal sector too. There is also the potential to work with development partners to provide private health insurance to certain target market segments. Add to this the potential to leverage technology to reduce costs and to develop and distribute innovative products.
On the other hand, cedi depreciation and its impact on the cost of drugs threats the financial viability of private health insurance schemes and so does the inability to control prescriber generation of costs. Another problem is the inability to attract sufficient investment into the industry due to lack of reliable industry performance data.
Leonards points out that the National Health Insurance Authority, which regulates the health insurance industry both public and private sector providers inclusive, is central to the private industry segment's fortunes going forward.
Most importantly, he points out, regulation of the industry by a market player is the wrong framework. Indeed, in the pensions industry, for example, the government set up an independent regulator, the National Pensions Regulatory Authority when it allowed the private sector in, rather than let SSNIT regulate the industry including its own dominant scheme. Leonard identifies the potential for the NHIA to control private provider tariffs by putting tariff caps on its scheme approval and licensing process. Instructively, cynics suggest that the NHIA does not do this in part because high tariffs on private schemes give the Authority’s own state-run scheme its biggest competitive advantage, this being price of membership.
All the same, the market for private health insurance, despite its relatively high cost could get so much bigger. Leonards identifies potential new markets as consisting of wage earners who already have corporate-sponsored health insurance – whether a private scheme or NHIS – but want supplementary cover and can afford to buy it themselves, People without any cover at all currently are also potential customers as are wage-earning households with additional income from other sources.
But the biggest potential is from the informal sector with many people having the resources to buy private health insurance but who are simply unaware of its benefits and how it can be accessed. To penetrate this market private health insurance providers will have to innovate new ways of reaching the informal sector with marketing messages. Indeed, the industry has not adopted advertising and publicity on the scale requisite to win over the retail segment of the market and those that do first will enjoy considerable first-mover benefits, winning clients that hitherto had not taken policies simply because they did not know how they work and the benefits thereof.
Eventually, private health insurance will become a huge market because of just how useful private health cover is. But it is those most willing and capable of innovating that will dominate ultimately and thus reap the huge rewards there for the taking.